POINT OF TAXATION RULES,
2011

Kirti Ltd is the owner of a coal-mine in Bihar. It obtained a
patent from the concerned competent authorities in relation of foregoing
coal-mine in February, 2011. Further, the company has entered into an agreement
with ABC Ltd in April, 2011 for allowing the latter party to extract coals for
the next three years. The consideration payable by ABC Ltd. for using the
coal-mine has been fixed @ Rs.1,000 per ton. The quantum of coal extracted by
ABC Ltd. and other relevant details re given in the following table:

Year

Relevant Output In Tonnes

Consideration for using the coal-mine @Rs.1000/- per tonne

Date of Issuance of Invoice

Date of Receipt of Payment

2011-12

2000

20,00,000

05.07.2012

26.08.2012

2012-13

3000

30,00,000

13.04.2013

03.04.2013

2013-14

4000

40,00,000

11.04.2014

20.07.2014

Solution:

It is pertinent to clarify here that
in the present question Kirti Ltd. is the service provider and ABC Ltd. is the
service recipient. Since whole amount of the consideration for the provision of
patent is not ascertainable at the time when service was performed and
subsequently the use of these services by a person other than the provider
gives right to any payment of consideration, both the conditions specified in
Rule 8 of POT Rules, 2011 get satisfied. The Point of Taxation of Kirti Ltd.
for the various Financial Years has been exhibited in the following table:

Earlier of the two:

1. Date of Issuance of Invoice OR

2. Date of Payment

The Point of Taxation is to be
determined in the above manner each time on the
occurrence of earlier of the above two events.

Point Of Taxation

Remarks

05.07.2012

Date of Issuance of
Invoice[05.07.2012] falls before Date of Payment[ 26.08.2012]

03.04.2013

Date of Payment [03.04.2013]precedes
Date of Issuance of Invoice[13.04.2013]

11.04.2014

Date of Issuance of Invoice[11.04.2014]falls
before Date of Payment[20.07.2014]

HMV Ltd. is having the copyright of classic songs of Late Kishore
Kumar recorded in a Compact Disk [CD]. The company gave the aforementioned copyright
to Super Cassettes Industries Ltd. [hereinafter abbreviated as 'SCI Ltd.'] on
20.04.2011. The consideration payable by SCI Ltd. to HMV Ltd. for acquiring the
foregoing copyright has been fixed @Rs.10/- per CD sold by it [SCI Ltd.]. The
No. of CDs Sold by SCI Ltd. during different financial years as well as other
relevant details is given in the following table:

Year

No. of CDs sold

Consideration for using the coal-mine @Rs.10/- per CD sold

Date of Issuance of Invoice by HMV Ltd.

Date of Receipt of Payment from SCI Ltd.

2011-12

4,00,000

40,00,000

29.07.2012

16.08.2012

2012-13

6,00,000

60.00,000

03.06.2013

23.05.2013

2013-14

7,00,000

70,00,000

16.06.2014

16.06.2014

Determine the point
of taxation for the same.

Solution:

The Point of Taxation
for differential financial years will be determined in the following manner:

Point Of Taxation

Remarks

29.07.2012

Date of Issuance of
Invoice[29.07.2012] falls before Date of Payment [16.08.2012]

Mr.
Hiren was providing the services of renting of campsites to schools, colleges
and corporates during the months of April, May, June and July. It was availing
the benefit of abatement of 50% on the said services. However, from 1st July,
2012, the rate of abatement was changed to 40%. Up to 31/06/2012 it had raised
various bills totaling to Rs. 10,00,000/-. The Payments for which were received
on 31.06.2012 Rs. 7,00,000/- , 15.07.2012 Rs. 3,00,000/- . It raised one
invoice of Rs. 5,00,000/- on 13.07.2012 for which the payment was received on
25.06.2012. For the month of June, it raised Bills amounting to Rs. 2,50,000/-
on 02.08.2012 and made the payment on 16.08.2012. Also, for the services
provided in the month of July, 2012 it raised bills of Rs. 6,50,000/- on 16.08.2012
and received the payments on 25.08.2012. Calculate the Service Tax Liability.

Solution:

In the given case,
the rate of abatement has changed from 50% to 40% on 01.07.2012. This amounts
to change in the effective rate of taxation. Hence, Rule 4 of the Point of
Taxation Rules, 2012 gets attracted. Therefore, the point of taxation for each
of the case is given below:

Month of completion of Service

Amount

Point of Taxation

Applicable Abatement Rate

Reason

Up
to the month of June, 2012

Rs.
7,00,000/-

31.06.2012

50%

POT
= Date of Invoice (31.06.2012) or Date of Payment (31.06.2012) which ever is
earlier

Rs.
3,00,000/-

15.07.2012

50%

POT
= Date of Invoice (31.06.2012), Since the service was completed and the
invoice was issued before the change in effective rate of tax,
notwithstanding the fact that the payment was made after the change in the
rate.

Rs.
5,00,000/-

25.06.2012

50%

POT
= Date of Payment (25.06.2012), Since the service was completed and the
payment was made before the change in effective rate of tax, notwithstanding
the fact that the invoice was issued after the change in the rate.

Rs.
2,50,000/-

02.08.2012*

40%

POT
= Date of Invoice (31.06.2012) or Date of Payment (31.06.2012) which ever is
earlier

For
the month of July, 2012

Rs.
6,50,000/-

16.08.2012

40%

POT
= Date of Invoice (31.06.2012) or Date of Payment (31.06.2012) which ever is
earlier

* Note:
It is essential to note that in the given case the invoice (issued on
02.08.2012) is not issued within the stipulated period of 30 days from the date
of completion of service (i.e. 31.06.2012). Even then, we have not taken the
POT as the date of completion of service, since the condition of invoice to be
issued within a period of 30 days is applicable only in cases covered by Rule
3.